A look at the Bespoke “interior integration concept” by Johnson Controls. Photo via fb.com
Johnson Controls said Monday that it has signed a definitive agreement to sell its automotive electronics business to Visteon Corp. for $265 million.
The company said that under terms of the agreement, Visteon, a global automotive supplier headquartered in Van Buren Township, would acquire Johnson Controls’ instrument cluster, infotainment, display and body electronics products.
Other terms of the agreement were not disclosed.
The acquisition is subject to certain regulatory and other consents and approvals and is expected to be completed in the second quarter of the 2014 calendar year, according to officials from both companies.
Mary Kay Dodero, Johnson Controls’ media representative, said, at this time, it is premature to comment on employees or specific locations.
“The details of the transaction will be determined as the two parties finalize it, which we expect will be in the second quarter of 2014,” she said.
The automotive electronics business is part of Johnson Controls’ Automotive Experience division. The division operates 15 facilities in Michigan, including six in West Michigan: Grand Rapids, Battle Creek and four in Holland, according to the Johnson Controls website.
Visteon said that the transaction involves about 4,800 employees, including about 1,000 engineers, electronics specialists and designers at seven research and development centers in Europe, North America and Asia.
The automotive electronics business has a diversified customer base, with BMW, Honda, Renault-Nissan, PSA Peugeot-Citroën and Ford representing about 72 percent of its annual revenue.
The transaction will complete Johnson Controls' divestiture of its automotive electronics business, which in aggregate realized total proceeds in line with original expectations of more than $965 million.
Milwaukee-based Johnson Controls previously announced that it had elected to move away from automotive electronics as part of its broader strategy to focus on core businesses and re-allocate capital to further diversify its portfolio and maximize shareholder value.
In September 2013, Johnson Controls sold the HomeLink product portion of its electronics portfolio to Zeeland-based Gentex Corp.
$58M in adjusted earnings
Visteon said that the purchase would make the company one of the world’s three largest suppliers of vehicle cockpit electronics.
“We look forward to continuing on our path of value creation for customers and shareholders by integrating this highly regarded business into the Visteon Electronics family,” said Visteon President and CEO Timothy D. Leuliette. “This is a strong strategic fit with our existing electronics portfolio and gives us the worldwide scale and cost efficiencies needed to support vehicle manufacturers’ global platforms and programs.
“It also diversifies our electronics customer base, solidifies our already strong global footprint and brings new technologies, capabilities and outstanding engineers to help grow our business.”
Visteon will assess the necessary addition of resources at its corporate center to support the operation.
In the fiscal year ended Sept. 30, 2013, the business to be acquired by Visteon generated approximately $1.3 billion in revenue and about $58 million in adjusted earnings, including a deduction of approximately $12 million for corporate allocations that will not transfer with the transaction.
The transaction offers opportunities for long-term margin expansion through economies of scale, with estimated annual cost synergies reaching more than $40 million by 2017, according to Visteon. The transaction will not impact the company's previously announced $1 billion share repurchase program, of which $875 million remains authorized.
Visteon said that the combined business would be a $3 billion global electronics enterprise with a No. 2 global position in driver information and above-average growth rates for the segment, supplying nine of the world’s 10 largest vehicle manufacturers.
“The combined business will result in market and technology leadership in major cockpit electronics technologies, as well as opportunity for entry and fast growth into new product lines,” said Martin Thall, president of Visteon Electronics, a division of Visteon Corp. “The size and scale of our integrated research, development and engineering will solidify Visteon as the ‘go-to’ global innovation partner for automakers who require rapid development cycles and fast time to market.
“Visteon and Johnson Controls are committed to maintaining complete business continuity and providing excellent customer service while completing this transaction and driving a successful integration,” Thall added.